Comments on Recent Cases: March 2023
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Part of my work involves reading court decisions to keep abreast of how judges decide the types of cases I handle. Below, I share some thoughts on recent decisions.
Court Affirms Dismissal of Contract Claim Where Key Details Not in Agreement
A court is unlikely to enforce a contract unless it sets forth the specific terms of the agreement. Otherwise, while a plaintiff may initiate litigation, a defendant may succeed on a motion to dismiss.
This issue arose in a recent case before the state appellate court in Manhattan. In that case, the plaintiffs alleges that there was an oral agreement with the defendant pursuant to which she would have a 1/6 interest in a company. But the subsequent written agreement did not have specific details, such as who else would have an interest in the company or the exact nature of the plaintiff’s interest. As a result, the court affirmed dismissal of the claim without discovery.
Although I think there was some risk that the court could have decided discovery was necessary to evaluate the legitimacy of the oral agreement, this case illustrates how courts may dismiss some contract claims without discovery.
Court Denies Full Faith and Credit To Foreign Decision on Motion to Dismiss
Litigants are generally given only one chance to litigate their claims. Once a court issues a final judgment on a matter, restrictions limit the litigant’s ability to argue the case again in another court. One such restriction is in the U.S. Constitution, which requires each state to give “full faith and credit” to the judgments other state’s courts. This restriction, however, has limits.
In a recent decision, the state appellate court in Manhattan considered whether it must follow the decision by a Delaware court that one contract clause takes precedence over another conflicting clause. The court rejected the claim that the “full faith and credit” clause required it to follow the Delaware decision since that clause only applies to “final judgments” and the Delaware decisions were not “final judgments,” but only decisions on motions.
Cases like this illustrate how the litigation decisions of one state court may (or may not) influence the decisions of another.
Court Decides Contract is Ambiguous Since Its Handwritten Term Contradicts a Typed One
In litigation, courts generally enforce contracts as written, but sometimes a contract is ambiguous. In that case, a court may require discovery and possibly a trial to determine what the contract means. One possible ambiguity arises when there is handwriting on a typed contract.
In a recent case before the state appellate court in Manhattan, the plaintiff submitted a contract whose typed terms state that the defendant will not be liable for delays. But the contract had a handwritten provision that said it would be liable for delays. The court held that the handwriting made the contract ambiguous and cited case law that said the handwriting may trump the typed clause as a better reflection of the parties understanding at the time of contract execution.
Cases like this illustrate how important it is to make sure parties know what the terms are of the contracts they are entering.
Court Refuses to Convert Defendant’s Initial Estimate Into a Cap On Its Hourly Fees
A lot of litigation arises from contracts where a plaintiff hires a defendant to perform work on an hourly basis but also provides an estimate about what the total cost will be. When the work exceeds the estimated cost, the defendant feels misled and may sue for breach of contract. But courts may be reluctant to treat the estimate as if it were a cap.
For example, in a recent case before the state appellate court in Manhattan, a law firm performed work for a client. The client did not pay its bill and asked the court to reduce the bill to a portion of the firm’s initial estimate. The court declined, noting that the parties’ agreement was for the client to pay “hourly rates” and that there was never an agreed cap on fees.
Cases like this illustrate how important it is for contracting parties to be clear about whether a cap exists on fees.
Court Refuses to Vacate Default Judgment Against Defendant Who Denied Receiving Complaint
If a defendant does not timely respond to a litigation, the plaintiff may get a default judgment against her. This may surprise a defendant who was unaware that a lawsuit was filed against her. Often, defendants ask courts to vacate default judgments on the ground that they were never really served with the complaint, but they are not always successful.
For example, in a recent case, the state appellate court in Manhattan considered a defendant’s request to vacate a default judgment. The plaintiff had a sworn statement by an agent who served the complaint at the address the defendant put in his loan agreement. The defendant denied receiving the complaint or being served at his address. The court held that the defendant’s denial was insufficient in light of the sworn statement and that the service was proper since it was at the address stated in the agreement.
Cases like this illustrate how important it is for defendants to pay close attention to whether they are being sued and to respond promptly.